Australia adds more jobs than expected in December

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The Australian economy added more jobs than expected in December, easing pressure on the Reserve Bank of Australia (RBA) to cut interest rates in the near term.

Australia added 37,400 jobs, above expectations for a 3,800 increase, with the rise made up of a 41,600 increase in full-time employment and 4,100 decline in part-time employment.

That brought the unemployment rate down to 6.1 percent, below expectations of 6.3 percent.

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"Despite today's figures... [we expect] some further deterioration in the unemployment rate over 2015 to a peak of 6.6 percent in Q2, in response to softer domestic growth outcomes and expectations," ANZ wrote in a note.

"While indicators of new labor demand have been increasing moderately, this is unlikely to be strong enough to counteract the flow of new workers into the economy and job losses in certain sectors. Today's figures should be characterized as a pause on the gradual uptrend," it said.

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Other analysts were also cautious following recent volatility in the jobs data.

"This is encouraging, and provides further support belief that consumption spending will improve and provide the key boost to overall growth in 2015. The ongoing weakness in hours worked is, however, hard to square away with such strong jobs growth and, in conjunction with a 17-year high in underutilization, suggests underlying trends may not be as strong as the headline numbers suggest," Goldman Sachs said in a note.

Shane Oliver, AMP Capital's Head of Investment Strategy and Chief Economist, agreed. The jobs data was "great but hard to believe", he wrote in a tweet.


Less pressure on the RBA

"Today's report takes the pressure off the RBA to cut rates as soon as February," Goldman said.

However, Goldman still expects a 25 basis point cut in March and stresses "that the extent of spare capacity in the labor market suggests wages present negligible upside risk to the weakening outlook for inflation."

ANZ agrees: "For the RBA, today's figures are encouraging. However the reality remains that the recovery in the non-mining economy has been slower to eventuate than expected and the sharp fall in energy prices creates more space for the inflation-targeting central bank to support the domestic economy."

ANZ expects the central bank to lower the cash rate to 2.0 percent by mid-2015 from 2.5 percent currently.

The Australian dollar jumped after the data was released, rising near the $0.82 level from $0.8144 in early Asian trading.